Bonds resume selloff on China factory pickup, gasoline rises

Bloomberg

Bonds resumed their selloff after an unexpected jump in Chinese manufacturing fueled optimism about the economy worldwide. Gold rallied as the dollar fell.
Treasury yields climbed toward the highest since May on speculation the Federal Reserve will raise interest rates this year. The MSCI All Country World Index posted its first back-to-back gain in two weeks, while the S&P 500 Index was little changed. Gold traded near a one-month high as the dollar slid, while gasoline surged the most since 2008 after an explosion and fire in Alabama shut the largest fuel pipeline in the US
Investors have been parsing economic data to weigh whether growth is strong enough for central banks to start shifting away from ultra-loose monetary policy. While the Bank of Japan and the Reserve Bank of Australia both opted to keep interest rates unchanged on Tuesday, traders are betting the US will boost borrowing costs in December. The market’s pricing in only a 16 percent chance the Fed will raise rates at the conclusion tomorrow’s meeting, with the odds on a December move at 73 percent.
“Market participants have reversed the very pessimistic view about the global economy,” said Birgit Figge, a fixed-income strategist at DZ Bank AG in Frankfurt.

BONDS
Treasury 10-year note yields rose four basis points, or 0.04 percentage point, to 1.87 percent at 9:58 a.m. in New York, according to Bloomberg Bond Trader data. The yield difference between US two- and 10-year notes widened, pushing the spread above 1 percentage point for the first time since May.
Spain’s sovereign debt led declines in Europe, pushing the yield on 10-year bonds to a four-month high, while those in the UK earlier approached the most since the nation voted to leave the European Union in June. Yields on similar-maturity German bunds increased three basis points to 0.19 percent.
Even after October’s rout, global bonds are still driving toward their best performance in seven years. The Bloomberg Barclays Global Aggregate Index has returned 6.8 percent in 2016.

STOCKS
MSCI’s global gauge of stocks rose 0.2 percent, following the worst monthly rout since January. The S&P 500 added less than 0.1 percent to 2,127.16, holding near a six-week low. Pfizer Inc. slipped after its quarterly profit missed estimates. Archer-Daniels-Midland Co. rose after the world’s largest corn processor posted better-than-expected earnings. Tronc Inc. plunged after Gannett Co. dropped its pursuit of the publisher of the Chicago Tribune and the Los Angeles Times.
The Stoxx Europe 600 Index fell 0.4 percent after disappointing results from Standard Chartered Plc and BP Plc. Royal Dutch Shell Plc added 3.5 percent after its adjusted profit beat forecasts. Rio Tinto Group led miners to the best performance of the 19 industry groups on the benchmark gauge following Chinese data.
The MSCI Emerging Markets Index rose 0.2 percent, after falling as much as 0.3 percent.

COMMODITIES
Gold gained for a fourth day, the longest run in a month, as the dollar extended its retreat from a seven-month high.
December-delivery gasoline rose as much as 15 percent to the highest level for a front-month contract since June after Colonial Pipeline Co., which carries oil products to New York Harbor from the US refining center in Houston, shut mainlines on the pipe for the second time in two months.
Copper climbed for a seventh day, the longest run of gains in almost 18 months. Oil traded near the lowest in more than a month as estimates of increased US stockpiles added to concern that OPEC will struggle to decisively tackle a global crude surplus.

CURRENCIES
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fell 0.2 percent, set for its lowest close since Oct. 20, as the improving economic outlook gave investors the confidence to buy currencies that are perceived to be riskier.
Mexico’s peso led losses among the world’s major currencies after an ABC News/Washington Post tracking poll conducted Oct. 27-30 showed US presidential candidate Donald Trump ahead of Hillary Clinton for first time since May. The Australian dollar jumped after the central bank left interest rates unchanged and said inflation was expected to pick up. The yen approached a three-month low after the Bank of Japan maintained its monetary stimulus and delayed the projected timing for reaching its inflation goal beyond Governor Haruhiko Kuroda’s term.